Green infrastructure investment ‘key to reigniting global growth’

Leading economists and political figures including former President of Mexico Felipe Calderón and former UK environment Minister Lord Nicholas Stern have this week warned that that more than $90trn (£70m) of infrastructure investment will be needed to deliver a climate-resilient, sustainable economy.

Governments and financial institutions are urged to scale up capital for green infrastructure over the next 15 years to spur global growth, deliver on the Sustainable Development Goals (SDGs) and reduce climate risks in line with the Paris Agreement, according to a new report launched by the Global Commission on Thursday (6 October).

The report suggests that the current low interest rates and rapid technological change mean that this is an “especially opportune moment for sustainable infrastructure-led growth”.

Global Commission chair Calderón said: “Investing in sustainable infrastructure is essential to solve all the world’s most pressing problems. It’s key to reigniting global growth. It’s key to reducing poverty. And it’s key to meeting the Paris Agreement. Infrastructure can be the pillar on which we build a sustainable economy, or it can crumble beneath us. It all depends on whether we get financing right, only then will capital fully shift in the low-carbon direction.”

‘Financial sea change’

The report highlights a range of barriers that hamper private investment flows to sustainable infrastructure, including high transaction costs, unfavourable investment regulations and policies, and a lack of transparent and bankable project pipelines, most notably in lower-income developing countries.

The Global Commission identifies four key areas where concerted action can help overcome these barriers and boost sustainable infrastructure investments. Fundamental price distortions such fossil fuel subsidies must be tackled collectively, the report suggests, to improve incentives for investment and innovation, and to generate revenue that can be directed to poorer countries.

Meanwhile, strengthened policy frameworks and institutional capacities are cited as enablers for private investment, while the paper also supports the scale up of investments in clean technology R&D and deployment to reduce the costs and enhance the accessibility of more sustainable technologies.

And lastly, the report states that the financial system must be transformed to deliver the scale and quality of investment necessary to increase financing from sources such as green bonds and green investment banks, reduce the cost of capital and accelerate the “greening” of the world economy.

Commission co-chair Lord Stern added: “The next couple of decades, and particularly the next two or three years, will be critical to the future of sustainable development. We can and should invest in and build cities where we can move and breathe and be productive, while protecting the natural world that underpins our livelihoods.

“We cannot continue with ‘business as usual’ which will lock in high-carbon infrastructure and create further congestion and pollution, while choking off development opportunities, particularly for poor people. This will require not only better policies but also a sea change in the financial system itself to make it fit for purpose for the scale and quality of investment we now need. The development banks, both national and international, should be at the centre of this: the growth story of the future.”

‘Global reservoir of capital’

The current global economic climate is seen by many as a suitable environment for public and private investment in green infrastructure, which would in turn improve financial growth and reduce world climate risk.

The Bank of England’s governor Mark Carney recently claimed that close to $7trn will need to be spent on new green infrastructure across the globe in order to cut carbon emissions over the next 20 years.

On a domestic level, research institutions at the London School of Economics and Political Science have suggested that the UK Government should boost economic growth by “tapping a global reservoir of free capital” to invest in sustainable infrastructure for energy, transport and cities. The ongoing privatisation process of the Green Invesment Bank has been viewed by the UK Government as an opportunity to mobilise international investment in UK green infrastructure.

George Ogleby

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